Los Angeles Marijuana: The Uphill Battle of Proposition D

Los Angeles. City of stars and city of illegal dispensaries.
Los Angeles. City of stars and illegal dispensaries.

Making sense of what is and is not permissible under Los Angeles’ medical marijuana regulations is a daunting task, particularly given the City’s lax enforcement and the rapid proliferation of creative new marijuana startups.

Marijuana law in California is complicated. Cannabis regulations vary widely from county to county and city to city, making it difficult to determine the applicable cannabis laws at any given time in any given location. The state provides little guidance to producers who grow marijuana, and no guidance to those looking to set up dispensaries or more elaborate edibles, extraction or delivery companies.

Trying to piece together county or municipal law with state law in California has proven to be a nightmare for marijuana entrepreneurs, who are desperately seeking guidance on how to operate legally. Los Angeles in particular has had a long-standing and mixed relationship with marijuana dispensaries.

Last year, the City of Los Angeles began implementing Proposition D, which was intended to reduce the number of dispensaries within city limits to 135 — the number of dispensaries operating prior to September 14, 2007. A 2012 UCLA study estimated that Los Angeles had at least 472 dispensaries, and the city estimated that in 2013, when Proposition D passed, the city had around 700 dispensaries.

Fast forward to this year. In April, Los Angeles City Attorney Mike Feuer proclaimed that the city had succeeded in closing more than 500 illegal medical marijuana businesses operating within city limits. He estimated that around 120 clinics currently met the city’s guidelines for immunity, which require possession of a business tax registration or tax exemption certificate issued by the City on or before November 13, 2007, registration with the City Clerk by November 13, 2007, and registration with the City, subject to all subsequent medical marijuana ordinances, among other criteria.

What the City Attorney did not clearly address were the medical dispensaries that are still operating illegally. Dispensaries in Los Angeles have been notorious for shutting down in one location and then re-opening in another. Limited resources have made it difficult for law enforcement to keep up. Though City Attorney statistics indicate the City is slowly reigning in illegal dispensaries, tax records show otherwise.

The Los Angeles City Finance Office recently released tax figures indicating that more than 1,100 medical marijuana collectives are actively registered to pay business taxes in Los Angeles. Taking into account duplicate registrations, The Greater Los Angeles Collective Alliance estimates that number falls below 900. According to the LA Times, more than 450 medical marijuana dispensaries had filed renewals to pay Los Angeles business taxes as of April 1 this year. Recall that the target number of dispensaries for Los Angeles under Proposition D is 135. Despite diligent efforts on the part of the City, coupled with local demand, it seems unlikely this target will ever be reached.

The state of affairs in Los Angeles once again demonstrates how critical marijuana reform is in California. We’ve said it before and we’ll say it again: If California does not implement an adequate regulatory framework for marijuana soon, federal intervention will likely escalate in a way that will not be good for the State’s medical marijuana industry.